Council in Cape favoring tax break

The Cape Girardeau City Council is expected to vote May 17 on whether it will observe Missouri's sales tax holiday in August.

Mayor Jay Knudtson and Councilman Hugh White both say the council is leaning toward approving the holiday. The Cape Girardeau Chamber of Commerce board of directors unanimously endorsed the tax holiday at its meeting Tuesday.

After the chamber's approval, Knudtson was generally in support of observing the holiday, although he still had some concerns.

The sales tax holiday is set for Aug. 13 through Aug. 15 and applies to back-to-school supplies and computers. During the holiday, the state won't levy state sales tax on specified goods. But cities and counties can choose to levy their local sales taxes as long as they notify the Missouri Department of Revenue of their intention to do so by July 9.

So far, a few cities in the region have decided to opt out of the holiday. They include Charleston, Farmington, New Madrid and Ste. Genevieve. Counties that have opted out include Mississippi, New Madrid, Stoddard and Ste. Genevieve.

"Research shows that this is a win-win situation for all involved," said chamber president John Mehner. "Retail centers receive an increase in business, and consumers have an opportunity to buy certain items tax free."

White said he was interested in what the chamber had to say about the issue because they represent the business community, but its endorsement was "one facet of a number of things I had to look at."

"I was reluctant at first not to have that revenue coming in, but as I've done my research I've become convinced it will do so much good for the community," he said. "Any losses we experience will be offset by the positives to the area as a whole."

Knudtson is still concerned that a tax holiday might send the wrong message to residents who are being asked to approve a fire sales tax in June. Some may think the city must not be in a bad financial state if it's willing to forgo sales taxes for a weekend, he said.

"We've spent quite a bit of time talking about this," Knudtson said. "I've probably been the council member that's been the slowest to come around to this."

He said the decision to approve the tax holiday would be simple if the fire sales tax was not going to be on June's ballot.

Knudtson said the decision to observe the holiday has positive aspects, although the financial incentive is minimal. "It would be an act of good will if we could be part of giving a break to citizens," he said.

Research suggests a typical family spends about $250 on back-to-school clothes annually, the Missouri Municipal League says. So a 6 percent local exemption, which would approximate lifting sales taxes by the state and Cape Girardeau, would save a typical family $15 on clothes, the municipal league says.

Shop in CapeThere is the hope that the tax break will spur shopping in Cape Girardeau.

According to the state ordinance, the sales tax holiday applies to computers up to $2,000, up to $100 in clothing, $50 in school supply purchases and up to $200 in computer software. All spending limits are per purchase.

"If it stimulates back-to-school sales, that's quite a crucial bump in the sales market," said Buz Sutherland, the director of the Small Business Development Center at Southeast Missouri State University. "There's a lot of money spent on back-to-school."

Westfield Shoppingtown West Park senior marketing director Joyce Hunter thinks the tax holiday would benefit the consumer, the retailers and the community.

"What we're hearing from merchants is that when their sister stores had had this, they have experienced a growth in sales," Hunter said.

A study circulated by the Missouri Chamber of Commerce indicated that tax revenue would likely go up in participating communities due to increased sales, including merchandise and services purchased by shoppers that are not a part of the tax holiday.

Cape Girardeau's proximity to several other states enhances the possibility of benefits.

"We really feel this will pull people, from not only Southern Illinois but Kentucky and even Arkansas," Hunter said.

These out-of-state visitors not only will shop, Hunter said, but will get Cape Girardeau on their radar and think about returning.

Retailers would not be inconvenienced too much by the exemption unless the city chooses to opt out, Mehner said. Most cash registers are equipped to do a tax-exempt sale. The hard part would be figuring out how to leave in the city tax and take out the state tax, he said.

Charles McGinty, owner of McGinty Jewelers and president of the Downtown Merchants Association, said figuring out the tax issues on the register would not be a big problem for a small retailer; all that would be needed is a calculator. For a larger store, however, he said it could be a nightmare.

Staff writer Mark Bliss contributed to this story.

kalfisi@semissourian.com

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